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I have been asked if I would like to become a partner, what to do?
2

I have been asked if I would like to become a partner, what to do?

I have been asked if I would like to become a partner, what to do?

(OP)
I currently work for a small engineering firm (35-40 people) and have been here for about 12 years. I am 41 years old and love what I do. A business opportunity has been proposed to myself and 4 other managers in the firm to obtain ownership of the company. Details on how this would be done, length of time, etc have not been discussed as of yet.

I realize those details could play a big role in my decision, but since I do not know what they are as of yet I need to focus on what I do know. Out of the 4 other managers, I could really only see myself partnering up with 2 or 3 of them. At least 1 of them I see as a horrible manager, always passing work to others without doing anything himself, always complaining there is too much work on his table, but then is nowhere to be found at 5PM, those kind of things.

It has gotten to the point that I do not enjoy being around this person at all because of his work ethics (he is lazy really) while I will do whatever it takes to get the job done and keep the client happy. He has been at the firm for 20+ years, so the owners do not see his everyday work habits (or lack of work I should say) and are blind to it all.

Sorry for the ramble, but I guess my question is should I even consider this? My neighbor mentioned to me that maybe I get in with these others to obtain ownership and build a stronger client bond, then branch off later. There is no doubt in my mind that I will feel that way in say 5 years as I know this guy will not change, it is just the way he is (at work and home). On one hand the ability to obtain ownership and build $$$ for a future departure or possibly starting my own business would be great, but on the other hand I do not want to screw the other managers who I have great respect for and believe could do a great job running a company.

Then on top of that, the detailed end of cost to gain ownership, etc will come into play and is the $$$ worth it for a company that I feel needs a lot of changes (the current personnel really need a boot in the behind, but the current owners allow it to continue because they have us picking up the slack).

Again, sorry for the ramble. I am brand spanking new to this and am really lost. Any help/suggestions, or even previous experience would be greatly appreciated. I find that everytime I try to come up with a positive reason to do this, I always fall back to the negative side. Would there be any positive at all in doing it even if it fell apart a year later? I almost feel like I am getting married and am already thinking what I will be expecting from the divorce.


John Nelson

RE: I have been asked if I would like to become a partner, what to do?

Have you spoken with the other partners about your concerns for this individual?  They may reconsider offering him a partnership if they knew of his true work habits.  Can (and will) others verify your perceived lack of work and commitment on his part?  If not, you could paint yourself in a bad light as a petty complainer.

Also consider if you want the uncommitted partner making a better living off of your hard work.  Will he work harder if he gets the partnership, or will he continue putting in a lackluster performance for a greater share of the profits?

I really think you should bring this up with the current partners as it will directly affect their own bottom line... and that could certainly play well in your favor as it shows your concern over the company's welfare.  Just be careful how you approach it.

Dan - Owner
http://www.Hi-TecDesigns.com

RE: I have been asked if I would like to become a partner, what to do?

(OP)
Thank you Dan. The partnership is being offered to us by the current owner, so that 1 particular manager is being included not by the others, but by the current owner.

A couple of the other managers feel the same way, so I guess it could get a little ugly when it comes down to discussing it in detail.

I planned on discussing my concerns with the current owner after I get some more details on how the whole process will work ($$$, how long before we own 100%, etc).

John

RE: I have been asked if I would like to become a partner, what to do?

Mack454,

I am not experienced at this, but I will express my opinion anyhow.

This person is not going to change. If the other two good partners have similar feelings then you should all meet the owner together to express these concerns. Employing him is his decision, going into partnership with him is your decision.

I would not want to be tied into a partnership with someone who doesnt pull his own weight.

Also, if he was really partnership material, why is he still an employee after 20 years. Shows a lack of ambition to me.

csd

RE: I have been asked if I would like to become a partner, what to do?

Is the current owner offering partnerships in league with him, or is he bowing out and offering the business outright to you and the others. If the latter, I doubt he would care too much who actually ends up as the owner(s). It could be any single one of you, or any multiple.

cheers

RE: I have been asked if I would like to become a partner, what to do?

(OP)
You hit the nail on the head. Everytime I try to think of a positive that would come out of this, I can't stop thinking of how lazy he is and that a person like that will never change. If anything once he gains some ownership I can see it getting even worse.

RE: I have been asked if I would like to become a partner, what to do?

(OP)
The current owner is planning on retiring, so it would be left up to the rest of us to take over.

RE: I have been asked if I would like to become a partner, what to do?

Quote (Mack454):

The current owner is planning on retiring, so it would be left up to the rest of us to take over.
Ah, this is definitely a useful piece of information that should have been included in your original post.  That being the case, the current owner has little incentive to ensuring a quality management team coming into position.  Therefore it would be irrelevant to him if one of the incoming partners is a less than ideal choice.

I would suggest getting together with the other like-minded guys outside of work and consider making a partnership offer to the current owner... only if it does not include the mediocre person.  The other guys will most likely agree to this condition as they won't want a mediocre person dragging them down, and the current owner will most likely agree to this as he won't want to lose an entire team (and the deal) because of one individual.

Dan - Owner
http://www.Hi-TecDesigns.com

RE: I have been asked if I would like to become a partner, what to do?

(OP)
Great point. My thinking is that the owner will just end up selling the company to another, larger firm if we decide not to act on it. In my mind that would be a quick and easy move on his part since business is still great for us now.

RE: I have been asked if I would like to become a partner, what to do?

Mack454
Whats this costing you and what are your expected returns?
Do you get the same money and a chance to work 60 hours per week?
Is the owner being benevolent or just tring to maximize hsi cash for retirement?
As for the other partners- it will be like being married to them.

RE: I have been asked if I would like to become a partner, what to do?

(OP)
Not another wife, 1 is enough for me :) Just kidding

Not sure as of yet, those details are to be explained to us hopefully within the next month or so.

RE: I have been asked if I would like to become a partner, what to do?

Mack 454, as others have said I would avoid this like the plague. It might be worth your time speaking to the other managers whom you get on well with and consider making an offer with them, without you knowing the terms even that is impossible to judge.

I own a company with a partner and we get on incredibly well both professionally and socially however things do get strained at times, it really is like a marriage. Running a company is a LOT of hard work and can be incredibly stressful at times, you WILL disagree over things, to try doing it with someone you have little or no respect for would be madness in my opinion.

RE: I have been asked if I would like to become a partner, what to do?

(OP)
Another vote against LOL

Thanks ajack, I appreciate the advice. It is getting pretty clear for me that the feeling I first got is what I should stick with, meaning I think I would be crazy to get myself into this with a person like him and would end up kicking myself in the ass for not going with my instinct.

RE: I have been asked if I would like to become a partner, what to do?

As I had several similar situations, maybe the most useful advice from myself is pretty simply:
try to see what you can get.

The only way to accomplish this is through conversation and eventual negotiations. If you could at least try to get some mode that will satisfy you, you can feel that you did everything possible.

For example, if you can negotiate to run one pretty indenpendent part of the company, and have a lot of freedom in management decisions, maybe that way you can extract benefits of situation.

If you would be rejected in such expectations, maybe it's the best to dismiss everything. There are too many elements with which you are not satisfied that there is almost no probability that you can solve them all
sunshine

RE: I have been asked if I would like to become a partner, what to do?

Mack,

I wouldn't write off the offer. Wait and see. Talk to the other proposed partners, including the one whom you don't particularly care. BUT! My biggest piece of advice, is to, TODAY, make an appointment with an attorney (not the one on rettainer by your firm), and meet with them ASAP. Do this prior to doing anything further with this situation. They will be able to arm you with the right questions to ask, and advise you of the pitfalls of your situation. And since you are paying them, they will (as far as your dollar carries you) look out for your interests in the deal.

Wes C.
------------------------------
No trees were killed in the sending of this message, but a large number of electrons were terribly inconvenienced.

RE: I have been asked if I would like to become a partner, what to do?

Sounds like you may be vested here with a real $$$ interest in the company.  

You need to lay all, and I mean all, your cards on the table for everyone to see,  Now is the time, not later.  It is easier to walk away with a buyout now than later.  Who knows, he may see the light and walk away.  See what happens.  Hope for the best, prepare for the worst.

Mike McCann
McCann Engineering

RE: I have been asked if I would like to become a partner, what to do?

(OP)
Thank you all, I really appreciate your advice. I am hoping to get those other details explained to me within the next couple of weeks. I have already spoken to another manager and he suggested we speak to the current owner and lay it all out on the table.

Boy, things are going to get interesting around here shortly.

RE: I have been asked if I would like to become a partner, what to do?

I was in the same position as you earlier this year, actually we might have worked together.  My ex firm had 3 owners, 2 where great the other was useless.  Still not sure what he does besides play golf, bitch about everything and bring down the moral of the office.  Since my goal was to own a firm I asked myself if I could be a partner with this individual.  In the end I decided I could not.  So I decided to invest my money in my own firm instead of joining theirs.  So far everything is going great and my only problem now is finding qualified CAD techs.  Good luck.

RE: I have been asked if I would like to become a partner, what to do?

(OP)
Thanks BRGENG, it is always nice to hear successful stories of people making it on there own.

RE: I have been asked if I would like to become a partner, what to do?

Not every oppertunity that comes along fits what you want. if you jump too soon, then you are not in a position to take advantage of other opertunities. Owning a piece of a firm is not a guarrentee of wealth. It sounds like there is a problem with moral in general. You know an incredible amount about this firm and the voice inside your head is saying don't do it. Have along conversatio with the voice. There are a lot of good firms that will be looking for Sr. people. Alot of owners looking for someone to transition to. It sounds like you are open to ownership, but it sounds like this might not be the best investment. Start looking around. Another oppertunity is out there.

RE: I have been asked if I would like to become a partner, what to do?

(OP)
Thanks DRC1, everything you listed makes sense. I am starting to see a couple of the others feeling the same way, great opportunity, bad timing and 1 or 2 of the wrong people are involved.

RE: I have been asked if I would like to become a partner, what to do?

(OP)
Well, I got a couple of details from the owner the other day. The way he would like to see us start is to purchase into the company (using our own $$$) to purchase roughly 20 shares of stock. That would allow all 5 of us to have equal shares. Over the course of the next few years, we will purchase the remaining stocks directly from him until we have full ownership.

The original buy in price was actually lower than I thought it would be. My wife and I have the ability to get in without tapping into our daughter's college savings if necessary. The owner recommended that all of us (not including him) sit down and discuss how we feel about this offer and how we feel having each one of us as a partner. I think this is the chance to get everything out on the table, partnership or no partnership. I do not want to hammer the guy too much, but I will start easy and see how he reacts at first.

More details and progress to follow.

RE: I have been asked if I would like to become a partner, what to do?

Good luck Mack.

I said it before, and I'll say it again... go see a lawyer ASAP!

Wes C.
------------------------------
No trees were killed in the sending of this message, but a large number of electrons were terribly inconvenienced.

RE: I have been asked if I would like to become a partner, what to do?

Make sure that you've taken a look at the financials of the business and that you feel comfortable with the valuation of the business that's implied by the stock price that they are asking you to pay.

Then, I would definitely talk to a knowledgable accountant and lawyer.

Congrats! It sounds like this is a great opportunity.

Mike
http://www.partnerup.com

RE: I have been asked if I would like to become a partner, what to do?

I'd be very leery of anything other than a complete majority share now.

Cheers

Greg Locock

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RE: I have been asked if I would like to become a partner, what to do?

As suggested strongly, get yourself a GOOD Attorney to represent you. My past experience 15 years ago with stock ownership with 3 other partners, if the company goes out of business how much is your stock worth?
And we had 1 person on the team who after the fact we discovered he wasn't worth having around.
Your very lucky to know this up front.
Have fun and good luck!

RE: I have been asked if I would like to become a partner, what to do?

No one has commented on the fact that the bad-seed engineer being considered for the partnership has been with the company for 20 years.  I would be willing to guess that one of two applies:

1.  Current ownership knows that this person is this way and routinely ignores this (and even offers partnership), representing a current management problem of ignorance that should be on on the top of your list as a new owner should you decide to accept the terms/ conditions.
2. Current ownership does not know this person is a bad-seed, which represents an even bigger problem since this person has been employed by the company for 20 years, representing a current management problem of being "asleep at the wheel" that should be at the top of your list as a new owner should you decide to accept the terms/ conditions.


Also as board room discussions go, some people find it difficult to confront these issues directly, but once you are tied financially to this person there's no alternative to being direct.  I recommend voicing your concerns before tying up an investment.

Finally, get a lawyer and understand stock valuation, current accounts receivable, no-compete clauses, and other t&c's.

RE: I have been asked if I would like to become a partner, what to do?

(OP)
Sorry I have not been back to update, things have been a little nuts lately.

Well, all of us sat down and had a nice little chat, basically talking about everything and anything that we see an issues between ourselves and the others that work for the company. A few of us expressed our concerns with this one particular potential partner. He was actually quite shocked to hear it, but took it well. Since then he has made making an effort to change his ways, but I do not know how long it will last.

We have all been in contact with an attorney who will be used to overlook the entire process and hopefully help make the transition a little easier (and protect all of us if necessary).

I would be lying if I said I am past worrying about this one particular person, along with the outlook of future work and the current staff that will need to step up to fill the void we leave. It appears this one particular person is pushing to run the entire show, top of the ladder which is pretty damn scary, but that has not been determined as of yet.

I know I will give it my all, whether things are rough or smooth, but will others follow the same way? This has really been the toughest decision in my life, and for some reason I always had this vision that if I had this kind of chance in life, it would be something I would not have to think twice about accepting.

RE: I have been asked if I would like to become a partner, what to do?

Mack 454 welcome to the world of owning a company.

If you are like me all these doubts will be the norm from now on, whilst nearly all-engineering decisions are based on facts and figures management ones are often based on gut feelings and common sense.

When you get them right it is hugely rewarding, but when you get them wrong they can be very costly and sole destroying and there will be no shortage of people telling you how you should have done things differently. Hindsight is a wonderful thing try and buy some in the January sales.
winky smile
Good luck and enjoy the roller-coaster ride.

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